Having less means wanting more: Children hold an intuitive economic theory of diminishing marginal utility

Abstract

Judgments surrounding resource acquisition and valuation are ubiquitous in daily life. How do humans decide what something is worth to themselves or someone else? One important cue to value is that of resource quantity. As described by economists, the principle of diminishing marginal utility (DMU) holds that as resource abundance increases, the value placed on each unit decreases; likewise, when resources become more scarce, the value placed on each unit rises. While prior research suggests that adults make judgments that align with this concept, it is unclear whether children do so. In Study 1 (n = 104), children (ages 5 through 8) were presented with scenarios involving losses or gains to others' resources and predicted the actions and emotions of the individuals involved. Participants made decisions that aligned with DMU, e.g., expecting individuals with fewer resources to expend more effort for an additional resource than individuals with greater resources. In Study 2 (n = 104), children incorporated information about preferences when inferring others' resource valuations, showing how quantity and preference are both included in children's inferences about others' utility. Our results indicate the early emergence of an intuitive economic theory that aligns with an important economic principle. Long before formal learning on this topic, children integrate quantity and preference information to sensibly predict others' resource valuations, with implications for economic decision-making, social preferences, and judgments of partner quality across the lifespan.

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